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The lender may not charge anything at the time of loan application except a reasonable fee to pay for a credit report. After delivery of the Loan Estimate and after the consumer gives an indication that he/she wants to proceed with the loan, the lender may charge additional fees and require the additional information needed to underwrite the loan.

Private lenders are exempt if the private lender does not meet the definition of “creditor” under 12 CFR § 1026.2(a)(17). Generally speaking that depends upon whether the private lender “regularly extends consumer credit” (See, 12 CFR § 1026.2(a)(17)(i)and(v)).

A person “regularly extends consumer credit” if they extended credit more than 25 times (or more than 5 times for transactions secured by a dwelling) in the preceding calendar year* or if, in any 12-month period, they originate more than one “high-cost” HOEPA loan that falls under the provisions of 12 CFR § 1026.32, or one or more such credit extensions through a mortgage broker.

*If the numerical standards are not met in the preceding year, they apply to the current year.

CAVEAT: It should be noted that even private lenders who do not meet the definition of “creditor” are subject to the Loan Originator Compensation Rule, which does not require a Closing Disclosure, but has its own set of prohibitions and requirements. (Seller financers who finance no more than one or no more than three properties in any 12-month period may qualify for exclusion from this rule depending on the specifics of the transaction.) (See, 12 CFR § 1026.36)

Lenders have the option of having the second loan disclosed on a separate document, or they can include it on the Closing Disclosure for the first mortgage. If shown on a separate document, it would not necessarily be on a Closing Disclosure. For example, because a HELOC is an "open-end" loan transaction, it could be disclosed using a HUD-1 type document or settlement statement. Only "closed-end" loan transactions are covered by the new rules and must use the Closing Disclosure unless they qualify for some other exemption.

If the lender wants to include everything on one Closing Disclosure, we believe the separate charges related to the second loan should be disclosed in "Section H. Other;" but the lender has the discretion to request itemization elsewhere.

If a fee to the consumer becomes inaccurate within 30 days of consummation and that inaccuracy results in a change to the amount actually paid by the consumer, the Creditor must deliver or place in the mail a revised Closing Disclosure (CD) within 30 days of knowledge of the inaccuracy.

If a clerical non-numeric error is discovered, the Creditor must deliver or place in the mail a revised CD within 60 days after consummation.

If a tolerance level is violated, the Creditor must refund the required amount to the consumer within 60 days of consummation and the Creditor must provide a revised CD reflecting the refund within the same 60 day time period.

You can easily remember the six elements by its acronym = A.L.I.E.N.S. (See 12 CFR § 1026.2(a)(3)(ii))

Address of Property
Loan Amount Sought
Income
Estimated Value
Name
Social Security Number

Unlike the HUD-1, the Closing Disclosure is created by the lender and the lender has ownership rights to it. For that reason, their approval is needed. In addition, since the Closing Disclosure contains far more Non-public Personal Information (NPI), caution should be exercised and borrower approval obtained before sharing it with others.

A better solution is to prepare a joint closing statement such as the ALTA statement or the custom settlement statements found in DoubleTime® and other closing software. The general sense is that these can be provided to real estate brokers without significant concern.

The TRID rules require that the settlement agent prepare and provide a Seller Closing Disclosure. There is no reason to give that to anyone other than the seller if you have prepared another joint closing statement but there is no NPI concern about the Seller Closing Disclosure.

Since an October closing usually means the first loan payment will be due on December 1, lenders often want the settlement agent to collect for and make payment of the current year’s tax bill when it becomes available in November. (Lenders may also insist upon similar withholdings and payments for closings in other months due to the logistics of setting up and administering the borrower’s escrow account for future payments.) Here are some examples of how lenders may allow these payments to be disclosed:

“Section F. Prepaids” is reserved for items the lender requires to be paid in advance of the first loan payment. Payment of the tax bill in November in advance of the first loan payment due in December satisfies that condition. If shown in Section F. Prepaids, the payment would likely be disclosed in the borrower’s column, but it could be directed to the seller’s column as well. In either case, the proration on page three in the Summaries of Transactions tables will apportion the obligation between the parties.

“Section H. Other” is intended to capture optional items as well as those services which the lender does not require as a condition of closing the loan. Since arguably the payment of a tax bill before its due date is not a condition for closing the loan, some lenders may decide that this is the appropriate location.

“Section N. Due from Seller at Closing” is intended, among other things, to capture the payoff of liened items such as the seller’s existing mortgage. Although some may discount the disclosure here of a not yet due tax bill, they do so on the theory that no lien has been recorded. Since, in Florida, the lien attaches automatically on January 1st of the tax year without the necessity of a recording, we feel this solution addresses the Florida situation accurately and that Section N is a viable alternative.